September fuel price report

Diesel drivers pay premium as pump prices near record

Filling up a typical 50-litre petrol or diesel fuel tank has gone up more than £2 in the past month

Filling up a typical 50-litre petrol or diesel fuel tank has gone up more than £2 in the past month. Diesel is 4.4p a litre more expensive than petrol, but AA research has uncovered a petrol-diesel wholesale price gap that is much closer and calls into question the high price of diesel at the pump.

September’s AA Fuel Price Report shows that the average cost of petrol has gone up 4.69p a litre since mid August, from 135.52p a litre to 140.21p. The cost of diesel on UK forecourts has soared 4.15p a litre, from an average of 140.45p a month ago to 144.60p now. In April, petrol hit a record of 142.48p a litre and diesel 147.93.

Since 1 July, when petrol sank to a summer low of 130.81p and diesel 136.12p, the cost of a typical 50-litre petrol refill has risen from £65.41 to £70.11. A tradesman’s van with an 80-litre diesel tank now costs £115.68 to refuel, compared to £108.90 at the low point.

Petrol prices have been buoyed up by speculation on tight supply caused by the impact of Hurricane Isaac, refinery fires and the closure of refineries for maintenance. Although oil prices rose following a US financial stimulus package, a stronger pound has offset some of the damage. There is also growing concern, even among investment bank analysts, that economic recovery is being undermined by bullish behaviour in the oil market.

Petrol-diesel price difference

Analysis by the AA of wholesale price data from the EU shows that, at least three times this year, spikes in the value of petrol across NW Europe have raised it to the same level as diesel.

For almost four weeks this spring, diesel was the same price if not cheaper than petrol. The two have closed again this month but UK drivers continue to pay a premium for diesel on forecourts.

UK wholesale prices shown to the AA reveal that, between 21 March and 18 April this year, diesel prices ranged from the same price as petrol to up to 2p a litre cheaper. However, throughout April, diesel remained at least 5.4p a litre more expensive than petrol at the pump - forcing diesel drivers and businesses to spend at least £2.5 million a day extra on fuel *.

Since then, despite diesel again becoming cheaper than petrol in the wholesale market, diesel remains at least 4p a litre dearer than petrol at the pump.

OFT investigation

Last week, the Office of Fair Trading announced a preliminary investigation into oil and fuel markets, due to report early next year. This came at the expense of talks between the Government and the fuel industry, initiated by former Transport Secretary Justine Greening, for the speedy introduction of a wholesale price indicator in the UK.

Putting the Justine Greening initiative on hold has given fuel retailers and suppliers the cover to perpetuate this petrol-diesel price gap for at least the next four months

Edmund King, AA president

Comment

“Putting the Justine Greening initiative on hold has given fuel retailers and suppliers the cover to perpetuate this petrol-diesel price gap for at least the next four months, potentially continuing to push up the travelling cost of tradespeople, road deliveries and rural workers – not to mention car owners who switched to diesel to reduce fuel bills,” says Edmund King, the AA’s president.

“The AA welcomes the OFT investigation but not at the expense of immediate and easily-achieved price transparency, which would have informed the investigation while empowering consumers and businesses at the same time. On Thursday, during the Commons’ backbench debate, two Conservative MPs voiced support for the initiative while shadow energy minister Tom Greatrex twice pressed the Government to push ahead with it.

“If the EU can publish a weekly track of petrol and diesel wholesale prices in euros per tonne, why can’t the UK government publish an equivalent in pounds per tonne or pence per litre on one of its websites? It doesn’t need an investigation, or permission of the fuel retailers or suppliers, just a form that can be understood by the public and business to ensure a fair price for all parties.”

Retail competition

Supermarkets and fuel companies have resorted to marketing ploys to try to attract drivers: Morrison introduced a gift card linked to fuel, Shell has linked up with Waitrose for money off fuel vouchers and Esso has upgraded the additives in its regular fuels.

Price, however, remains the main driver with supermarket dogfights keeping petrol down as low as 134.7p in Harrogate and 133.7p in Inverness, compared to the lowest supermarket brand average across the UK of 137.56p.

Regional

Regionally, the most expensive area in the UK for petrol is Northern Ireland at 141.1p a litre, while London undercuts even Yorkshire and Humberside to be the cheapest at 139.8p a litre. Scotland beats Northern Ireland in selling the most expensive diesel in the UK, averaging 145.2p a litre, while Yorkshire and Humberside is cheapest at 144.1p.

(18 September 2012)

Fuel price data supplied by Experian Catalist

* Source: Department of Energy and Climate Change fuel retail sales figures for the second quarter of 2011. From April to June 2011, the UK bought 45.6 million litres of diesel a day from forecourts.